this post was submitted on 26 Dec 2023
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Most individuals still have to work out a debt repayment plan. I know some credit cards and loans still have to be repayed even in bankruptcy. Chapter 11 bankruptcy is only available if you're a corporation or a kajillionaire.
This is just not true.
But it’s on the internet?
Fair point.
Which part is untrue? Didn't they change the rules of bankruptcy like a decade ago or something?
It used to be that you could get all your loans discharged and in essence just end up with a really bad credit score. I thought they changed it so people still had to pay their debts off even if they declared bankruptcy.
Unsure if it applied to corporations though.
That’s chapter 7. There are some debts that cannot be wiped out via bankruptcy. That’s true for corporations too. And when it happens, they get liquidated.
You can’t really liquidate a person and cease it to be an ongoing concern. The dynamics are different.
Chapter 11 can and does get filed by people - but it’s a reorganization, and buys you time to negotiate with the debt holders if able for a reduced amount or a longer repayment plan or reduced interest instead of going through chapter 7 where they’ll get nothing or very little if it’s unsecured debt.
Both will tank your credit.
I've been through it and the attorneys involved stated up front, no individual can apply for "Chapter 11" bankruptcy, and then they proceeded to give me the current literature about state law. Maybe it's differerent from state to state, but where I live individuals are not allowed to file for Chapter 11 bankruptcy.
Everyone I've talked to that went through what I did was required to file for Chapter 7 bankruptcy instead. And yes it did tank my credit, until I paid off the bankruptcy and had it discharged. Then suddenly I was getting notices about "preapproval for credit" once again (which I totally disregard, I'm not going through all that again!).
It does not vary by state. Usually 7 or 13 are better/faster for individuals - but there's no reason you can't.
https://www.debt.org/bankruptcy/chapter-11/
Sounds good.
What isn’t true that I was replying to is that chapter 11 bankruptcy is only for corporations and gazillionaires. Regular people can use 11 to their benefit often - especially if they aren’t so far in the hole they can’t see daylight.
Secured debt can be discharged without forfeiting the collateral by paying it off or coming to a new arrangement in a chapter 11 proceeding.
While there is a lot of discretion judges get in the vast majority of 7 or 13 proceedings, unsecured credit holders are entirely wiped out, or very nearly. Each individual case is different of course.
Bankruptcy debt settlement are usually for a fraction of the stated amount. I've heard of families who have discharged over 100k of cc debt and only had to pay about 10k. Usually you will lose bigger assets like vehicles, but keep your home.
You can and will lose your home in many many states (non homestead states primarily). If the person you aren’t paying is your mortgage holder, you’re definitely going to lose your home You will also almost always lose non-primary residences provided they need to be liquidated to settle your debts. You will be given any excess money from the liquidations after your debts are settled.
If you’re settling debts you’re probably doing chapter 11 not 7.
Chapter 11 requires your lenders to play ball, but if they think they can make more money by extending terms of offering a discount than if they force you into chapter 7, they will.
If you make $5k/mo and your living expenses are $3k/mo and you have $3k/mo of debt for the next 30 months, reasonable lenders would look at that and say I’d rather have $1.5k for 60 months and I believe you can pay it rather than rolling the dice in chapter 7 on what assets you have or don’t have and what they’re worth when they finally get liquidated.